Burmese Bank Rumored on Verge of Bankruptcy
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Burma

Burmese Bank Rumored on Verge of Bankruptcy


By YENI Friday, January 14, 2011


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Cooperative Bank, Burma's second-largest privately owned financial institution, is fighting for its survival as depositors rush to withdraw their savings amid rumors that the bank's owner is involved in a business dispute with a crony of one of the ruling regime's most powerful generals.

According to Rangoon-based business sources, the bank's reserves have dwindled to almost nothing, and its chairman, Khin Maung Aye, is struggling to secure credit from other banks to stay afloat.

Among the banks that Khin Maung Aye has turned to are Kanbawza Bank, owned by Aung Ko Win, a close associate of Vice Snr-Gen Maung Aye, the Burmese junta's second in command, and Myawaddy Bank, owned by the military-run Union of Myanmar Economic Holdings Limited.

“None of them will lend him anything. We are very concerned that Cooperative Bank is on the verge of collapse because of its extremely weak financial position,” said a source close to the banks.

However, there have also been reports that some of Burma's senior leaders have stepped in to prevent the failure of the bank. Specifically, former Gen Thein Sein, the country's prime minister, and former Maj-Gen Tin Htut, the minister of the Co-operatives and patron of the Cooperative Bank , who are said to be close to Khin Maung Aye, are believed to have intervened on the bank's behalf.  

The same reports added, however, that Khin Maung Aye remains under pressure, with some other leading generals pushing for his resignation as the bank's chairman and as the secretary general of the Myanmar Bank Association.

According to Burma's Central Bank, Cooperative Bank held around 35 billion kyat (US $42 million) in deposits before the crisis. However, sources said that depositors began quietly withdrawing their money from the bank in mid-December after it was rumored that Khin Maung Aye was on bad terms with former Lt-Gen Thiha Thura Tin Aung Myint Oo, the regime's secretary 1 and Trade Council chairman.

Sources said that Khin Maung Aye's troubles started when he complained late last year about Tin Aung Myint Oo's decision to give licenses to Asia World, a company owned by his business associate Tun Myint Naing (aka Steven Law), the son of former drug lord Lo Hsing Han, to operate ground handling and passenger services at the country's two international airports in Rangoon and Mandalay.

Tin Aung Myint Oo has also recently awarded several other major contracts to Asia World, including  for construction of hydro-power plants, jetties in Rangoon port, airports, and roads and bridges.

“Khin Maung Aye openly asked Tin Aung Myint Oo to give the ground handling and passenger services licenses to MAI [Myanmar Airways International], which is partly owned by Cooperative Bank,” a source said, adding that this prompted the regime's secretary 1 to urge some action against Khin Maung Aye in meetings with other top generals in Napyidaw.

According to business sources, the Trade Council has been pushing Khin Maung Aye to sell Cooperative Bank's shares in MAI and hand control of the airline to Kanbawza Bank, which bought the former national airline early last year in partnership with Cooperative Bank and Tun Foundation Bank. Meanwhile, Khin Maung Aye's construction company, Kaung Myanmar Associates Construction, has also lost contracts to build state guest houses in Naypyidaw.

As Khin Maung Aye's fortunes continue to plummet, business people are watching the market closely to see what impact all of this is having.

One effect so far, according to business sources in Rangoon, has been a rise in demand for gold, as businessmen who have withdrawn their money from Cooperative Bank buy the precious metal for safekeeping.

“Demand has immediately jumped up,” said the owner of a gold shop in Rangoon. “When I ask the customers, I found that many were businessmen who had withdrawn their money from Cooperative Bank.”

The price of gold in the Rangoon market on Friday was 634,500 kyat ($761.70) per kyat-thar (0.567 ounce).

Another reason for the increased demand for gold, said some observers, was that many business people are buying it as a hedge against a further decline in the value of the US dollar against the kyat. One US dollar is currently selling for 833 kyat.

Yan Pai and Aung Thet Wine also contributed this article.

COMMENTS (10)
 
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Myanmar Patriots Wrote:
18/01/2011
Banking is important to economic development. Commerce cannot be efficient without proper banking, transport and communication systems.

However, banks must be regulated. That is the job of the incoming parliament. Monopoly profits must be dealt with windfall tax.

shwe moe Wrote:
18/01/2011
What Myanmar is to Zimbabwe, Than Shwe is to Mugabe; Zimbabwe dollar is to the Myanmar Kyat, can the million Kyat note be far behind...print on Ulay Than Shwe.

Ye` Gyi Wrote:
17/01/2011
100% Wrong news. That's rumor.
Go and see to CB Bank.
You will see that everything is normal.

When I went to CB Bank on 11 Jan, they run normally.

FLC Wrote:
17/01/2011
It seems to me per kyat-thar equals 0.576 troy ounces instead of 0.036 ounces as manifested in this article. And a troy ounce of gold (1.736 ticals) is still far away from 2 ticals (kyat-thar) as the comment indicated.

shwe moe Wrote:
16/01/2011
Financial Institutions dealing with funny money are funny themselves and have no right to exist - off with their heads.

malihkrang Wrote:
16/01/2011
U Tay Za, a new comer in Burma banking might have played rumored games to let CP Bank got into trouble. I can see Tay Za want to become the secretary general of the Myanmar Bank Association.

Related article at: Owners of New Private Banks Can't Raid the Till http://www.irrawaddymedia.com/article.php?art_id=19044&Submit=Submit

Nyunt Han Wrote:
15/01/2011
All the privately owned financial institutions in Burma are run by shady characters,so it's no wonder they are not trusted.
Where else in the world can you get a 10% interest on your bank deposit account withdrawable anytime without penalty ?
And where do the generals put their ill-gotten stash ? In Singapore OCBC of course, with Lee Kwan Yew's blessings !




luusoelay Wrote:
15/01/2011
Trouble, Trouble... so I'll predict that the kyat will surge well over K 1300 = $ 1.00.

Believe it or not fire is starting...

Mr. President can you save it or take it.

Oh by the way congratulations newly to be a President.

KKK Wrote:
15/01/2011
Burmese banking systesm was collapsed since twenty plus years ago. This the way of generals running the country. Junta issue a billion kyat note pretty soon. Let's go back to barter system.

PB Publico Wrote:
15/01/2011
As I know of it, a Troy ounce of gold weighs approximately 2 ticals (kyatthars). This works out the price of gold in Burma to be equivalent to US$ 1523. somewhat higher but closer to the world gold price than as indicated in this article.

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